Bank branches are a ‘massive drain on costs’, says challenger bank

Bank branches are a 'massive drain on costs', says challenger bank




Bank branches with bad customer service could become obsolete according to Joel Perlman, Chief Strategy Officer at OakNorth Bank.

Joel explained that while not all bank branches would disappear, branches with bad customer service would be first to go.

Many challenger banks operate entirely online, which Joel argued was an advantage.

“Having branches is a massive drain on costs and high street branches have historically been a bastion of pretty terrible customer service, so they have negative connotations,” he explained.

“No one likes to walk into a branch to do their banking.”

Joel claimed that with 600 UK bank branches closing in the past 12 months, there were a number of key benefits to operating without a branch system.

“Being branchless allows banks like OakNorth to have a much lower cost footprint, and enables us to better control the customer experience and consistently provide excellent customer service.

“In this day and age, people can get really excellent customer service using a computer and a telephone, and never have to go through the ordeal of walking into a branch.”

However, John Jenkins, CEO of Amicus Finance, raised the question as to how digital banks could reach customers who were not tech-savvy.

Speaking at the NACFB Expo, John suggested challengers would need to be prepared to serve customers who were not interested in digital banking.

“I can’t see any challenger bank wanting to open a branch network, which creates an interesting thought process for the future as to how and why do you get to people who don’t want to deal with you online,” he explained.

At the same event, Nick Leitch, Managing Director at Seneca Secured Lending, argued that the future of banking could not rely on digital transactions alone.

He added: “I think there has to be a very good balance between customer relationships and the cost of building customer relationships.

“The end products have to be innovative, but it’ll be about service.

“It’s going to be about having some relationship [with customers], delivering good service and having very good mechanisms for getting that money to those customers fast.”

Iain Kirkpatrick, Managing Director of Retail at Metro Bank, concurred with Nick.

Iain insisted that digital banking and fintech was a compliment to physical branches, rather than a threat.

“At Metro Bank, our customers and their needs always come first and we recognise that our customers must have a choice about how they do their banking.

“Our stores enable us to provide tangible as well as traditional banking services and build personal relationships with local people, businesses and communities.

“Part of this means ensuring that our stores offer real service benefits for customers, backed by amazing in-store technology.”

With its first branch opening in Holborn in 2010, Metro Bank now offers both face-to-face and app banking.

In addition to this, the firm boasts a range of physical technology in store, such as coin-counting machines and credit-card printing services.

Iain also explained that there were other benefits to having branches.

“We use our stores to hold regular networking and community events bringing together local residents, businesses and schools.” 

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